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Price Differentiation Between On-net And Off-net Calls: An Application To The Chilean Telephony Market

Author

Listed:
  • Claudio A. Agostini

    (School of Government, Universidad Adolfo Ibáñez)

  • Eduardo H. Saavedra

    (ILADES – Universidad Alberto Hurtado)

  • C. Manuel Willington

    (School of Government, Universidad Adolfo Ibáñez)

Abstract

This paper characterizes discriminatory plans offered by Movistar in Chile in May 2010, before the Competition Court of Chile banned the offer of plans based on different prices for on-net and off-net calls. Using a model of strategic interaction among firms that set discriminatory and nonlinear prices, this paper assess the extent to which on-net and offnet price differentials in this plans represent predatory practices in the mobile telephony market in Chile. The main result is that for high levels of call externality, most Movistar’s offered plans should be explained by efficiency and strategic reasons. However, for low levels of call externality at least half plans for individual customers could present evidence of anticompetitive practices. Therefore, whether our result justifies or contradicts the Competition Court’s decision is a matter of future empiric work, since information regarding the call externality parameter is not fully reliable.

Suggested Citation

  • Claudio A. Agostini & Eduardo H. Saavedra & C. Manuel Willington, 2016. "Price Differentiation Between On-net And Off-net Calls: An Application To The Chilean Telephony Market," ILADES-UAH Working Papers inv313, Universidad Alberto Hurtado/School of Economics and Business.
    • Handle: RePEc:ila:ilades:inv313
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    Cited by:

    1. Claudio A. Agostini & Eduardo H. Saavedra & C. Manuel Willington, 2016. "Price Differentiation Between On-net And Off-net Calls: An Application To The Chilean Telephony Market," ILADES-UAH Working Papers inv313, Universidad Alberto Hurtado/School of Economics and Business.
    2. Agostini, Claudio A. & Willington, Manuel & Lazcano, Raúl & Saavedra, Eduardo, 2017. "Predation and network based price discrimination in Chile," Telecommunications Policy, Elsevier, vol. 41(9), pages 781-791.

    More about this item

    Keywords

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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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